bp Continues Energy Transition Reinvention with Sale of Petrochemicals Business
In a continuation of activities aimed at reinventing bp and aligning the company for the coming decades of energy transition, bp announced today that it has entered an agreement to sell its global petrochemicals business to chemicals company INEOS for $5 billion. Subject to regulatory and other approvals, the transaction is expected to complete by the end of 2020.
Earlier this year, bp outlined an ambitious, multifaceted sustainability plan including targeting net zero greenhouse gas emissions from its operations worldwide by 2050, increasing investment allocation to non-oil and gas businesses and advocating for net zero policies, such as carbon pricing. bp also embarked on a process of balance sheet-strengthening asset divestments, raising its target earlier this year to $15 billion by mid-2021. Today’s announcement is in line with both initiatives, and brings bp to its $15 billion goal a year ahead of target.
bp’s petrochemicals business is focused on two main businesses – aromatics and acetyls – each of which has leading technology and advantaged manufacturing plants, including a strong presence in growth markets in Asia. In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the US and in 2019 produced 9.7 million tonnes of petrochemicals.
Commenting on today’s announcement, Bernard Looney, bp Chief Executive Officer said:
“This is another significant step as we steadily work to reinvent bp. These businesses are leaders in their sectors, with world-class technologies, plants and people. In recent years they have improved performance to produce highly competitive returns and now have the potential for growth and expansion into the circular economy.
“I am very grateful to our petrochemicals team for what they have achieved over the years and their commitment to bp. I recognise this decision will come as a surprise and we will do our best to minimise uncertainty. I am confident however that the businesses will thrive as part of INEOS, a global leader in petrochemicals.
“Strategically, the overlap with the rest of bp is limited and it would take considerable capital for us to grow these businesses. As we work to build a more focused, more integrated bp, we have other opportunities that are more aligned with our future direction. Today’s agreement is another deliberate step in building a bp that can compete and succeed through the energy transition.”
INEOS is a leading global chemicals company with a network spanning over 180 sites in 26 countries, employing some 22,000 staff worldwide. Over the past two decades, INEOS has acquired a number of businesses from bp, most notably the 2005 $9 billion purchase of Innovene, the bp subsidiary that comprised the majority of bp’s then chemicals assets and two refineries.
Brian Gilvary, bp’s Chief Financial Officer led negotiations with INEOS. Gilvary said, “With today’s announcement we have met our $15 billion target for agreed divestments a full year ahead of schedule, demonstrating the range and quality of options available to us.”
“bp has had a long relationship with INEOS and this agreement reflects the mutual respect and trust that exists between us. It is a strategic deal for both parties that recognises both the high quality of the businesses and that INEOS is in many ways a natural owner for them.”
Bp stated that its aromatics business is a global leader in the production of purified terephthalic acid (PTA), a key feedstock for the manufacture of polyester plastics, and its precursor paraxylene (PX). The business’s largest manufacturing plants are in China, the US and Belgium and it licenses its leading PTA production technology to producers around the world.
The acetyls business produces acetic acid and derivatives such as acetic anhydride, which have uses in a wide range of sectors. It has a diverse base with manufacturing plants in the US, the UK, China, Korea, Taiwan and Malaysia. The sale will also include related interests such as the chemical recycling technology bp Infinia and bp’s interest in acetylated wood developer Tricoya.
In total, the businesses included in the transaction currently employ over 1,700 staff worldwide. These staff are expected to transfer to INEOS on completion of the sale.